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Doximity (NYSE: DOCS) is the most popular digital platform among U.S. healthcare professionals. Serving as a sort of social network for clinicians, the platform allows clients to connect with colleagues, coordinate patient care, and conduct telehealth visits. In this Backstage Pass video recorded on Jan. 4, 2022, Motley Fool contributor Jamie Louko explains why Doximity looks like a smart long-term investment.

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Jamie Louko: My pick is Doximity. It's commonly known as the [Microsoft's] LinkedIn for doctors. But really I think that's a misnomer because it's so much more than that. Not only is it a career growth platform, but it also has patient-to-doctor communication, doctor-to-doctor communication, a research page for doctors to learn about the newest and greatest drugs and practices. It also has a telehealth service. All of this, what I consider as a super app for doctors, has attracted 80% of healthcare professionals on the platform, and that is 1.8 million healthcare professionals, including 90% of medical students today.

This massive attraction of doctors and students has led to the platform becoming incredibly valuable to pharmaceutical manufacturers, for drug makers to advertise on Doximity. We're going to talk about the competitive edge a little bit. Like I said, Doximity has 1.8 million doctors on this platform. Doctors account for 73% of the $4 trillion dollar healthcare industry spending each year. They basically dictate -- and they said this in their, not 10-K because this was recent IPO, but their 424B4, that doctors give direction for 73% of the healthcare industry spending each year, which is massive. If you're a drug maker trying to be a part of that $4 trillion dollar spending each year, you really want to be in front of the eyes of the decision-makers, and Doximity is that place.

Jumping down to some of the financial metrics: 33% percent of the advertisers who advertise on Doximity are spending over $100,000, which is absolutely crazy amount of spending. The net retention rate, meaning pharmaceutical manufacturers who were customers a year ago, are now spending 73% more than they did a year ago. That net retention figure is one of the highest figures I've ever seen. That goes up with Snowflake in terms of net retention rate figures.

The other competitive advantage to Doximity its network effects. Just like LinkedIn, you want to be where everybody else is in the space. If you are a medical student, you're going to want to try to grow your career with other doctors and that place to go is Doximity. If you're a medical student and you're looking to grow your career on Doximity or some Joe Schmo competitor, you're going to go to the place that has 80% of healthcare professionals on the platform just because that's where the people are. That's where you can make the connections with other doctors. Just like this really strong performance in market leadership has led to really strong growth. What's eye-popping to me for Doximity is their net income margin in their second quarter of 2022. They are a weird company that is in the fiscal year 2022 right now, but the most recent quarter net income margin was 45%, and they're still growing 76% on their top-line. Because of their market leadership and their brand-name among doctors, they are able to bring so much of that top-line revenue growth from breakdown to the bottom line. I think that is astounding for such a high-growth company. It's one company that I don't own, but if I was to buy one brand-new company right now that I don't already own, Doximity will be very high on my list.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Jamie Louko owns Snowflake Inc. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool owns and recommends Doximity, Inc., Microsoft, and Snowflake Inc. The Motley Fool has a disclosure policy.


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